Army raises RFID spending cap

Aug. 31, 2004 DOD Suppliers' Passive RFID Information Guide

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The Army more than doubled the ceiling of its smart radio-frequency identification (RFID) contract with Savi Technology Inc. to $207 million from $90 million to support shipments of supplies and equipment to the Central Command's area of operations.

Also, officials at the Army Automatic Identification Technology (AIT) Office are evaluating responses to a request for bids to supply passive RFID tags and readers. The equipment would be used for a massive Defense Department project to identify all cases and shipping pallets with passive RFID tags starting in January 2005.

But at least one analyst said the military has started its procurement too late to equip depots with RFID readers by the time suppliers start delivering tagged shipments.

Reginald Bagby, deputy product manager for the Army's AIT program, said the increase in the ceiling value of the battery-powered RFID tags, which have a range of 300 feet, reflects the "burn rate" of tags used to support shipments to Iraq.

Because DOD officials have mandated that all shipments to Iraq be tracked with the Savi products, more than 1 million tags will have been used this year by U.S. units and their coalition partners, Bagby said.

David Stephens, Savi's senior vice president for the public sector, said DOD's use of the company's smart tags has significantly increased this year, but he did not provide details. Savi is also now providing its new model ST-654 smart tag, which has a 256K data store -- twice the memory of the previous tag DOD officials used -- at a lower cost, $70 vs. $99, Stephens said.

As the target date approaches for suppliers to use batteryless RFID passive tags, which have a range of about 3 feet, officials at the AIT office are evaluating responses to their request for information for broad purchase agreements, which will cover the acquisition of passive tags and readers to track all purchases through DOD's supply chain.

In a briefing last year, Alan Estevez, assistant deputy undersecretary of Defense for supply chain integration, said passive RFID tags eventually will be used to track 45 million line items from supplier to military depots and then to end users.

DOD will phase in passive RFID tags based on standards developed by EPCglobal Inc., the standards-setting body for the RFID industry. According to a department memo issued last month, vendors with contracts signed on or after Oct. 1, for field rations, clothing, and weapon systems repair parts and components will have to use the tags on pallets and cases of shipments delivered to military depots in Susquehanna County, Pa., and San Joaquin County, Calif.

According to the memo, other classes of suppliers and receiving depots will have to be RFID-compliant in January 2006, with the entire supply chain converted to RFID in 2007.

The military's passive RFID program will dwarf similar projects in the retail supply chain led by Wal-Mart Stores Inc., Bagby said. Mike Liard, an analyst with Venture Development Corp., agreed. "DOD has over 40,000 suppliers, while Wal-Mart has much less," Liard said.

Based on the fact that the procurement of RFID readers just started, Liard said he doubted DOD would even be capable of equipping the Susquehanna and San Joaquin depots with the tag readers and network infrastructure by next January.

The military also faces a huge bill, which Liard said he cannot even begin to calculate for RFID infrastructure. He estimated that the infrastructure costs for just one warehouse will run from $250,000 to $500,000, and DOD could spend "millions or tens of millions of dollars" to put in the RFID infrastructure at a depot.

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